Recently, Jim Cramer sifted through the S&P 500 to identify stocks that satisfy his criteria: yield, earnings growth, and value. He explained the need behind the criteria:

“In a market with huge year-to-date gains, you got to get a little more selective about what you buy. Which is why I created this three-part test, also known as tripartite test.”

To navigate this market, he developed a three-part evaluation framework, which he refers to as the YEV test. Cramer explained that the first criterion focuses on yield, specifically seeking stocks that offer better returns than the current yield on the 10-year Treasury, which sits slightly above 4%. The second criterion is outsized earnings growth, meaning he looks for companies expected to exceed the 14% growth forecast for the S&P 500 next year. Lastly, Cramer seeks value, targeting stocks priced lower than the S&P 500, which currently trades at around 21 times next year’s earnings estimates.

“We want stocks with higher yields than the 10-year Treasury, meaning 4% plus. We want faster earnings growth than the S&P 500. In the aggregate, that’s faster than 14%. And we want a price-earnings multiple lower than that of the overall S&P 500, which trades at 21 times next year’s earnings, which everybody says is a little elevated.”

While Cramer acknowledged that his criteria was challenging to meet, he successfully identified nine stocks that fit the YEV model. He noted that although the Federal Reserve has created a favorable environment for investors, resulting in substantial market gains, it is crucial to exercise caution when selecting stocks.

Observing the historical trends, Cramer pointed out that October has generally been a strong month for the market, yet he reiterated the necessity of being discerning in purchases. He encouraged viewers to consider these nine stocks as the top tier within the market. He went on to emphasize:

“Now, I want you to think of them as the elite of the elite. Not many companies can give you high yields, cheap stocks, and explosive earnings growth all at the same time… Here’s the bottom line: in a market like this one, you do need to be selective, which is why we’ve fallen back on yield, on earnings and on growth and on value. Okay, now these are all things that are very hard to find right now.”

Our Methodology

For this article, we compiled a list of 9 stocks that fit Jim Cramer’s YEV stocks criteria and were unveiled during his episodes of Mad Money from October 7 to October 10. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Jim Cramer’s Exclusive List of 9 YEV Stocks

9. Dominion Energy, Inc. (NYSE:D)

Number of Hedge Fund Holders: 27

During one of the episodes, Cramer dived into Dominion Energy, Inc.’s (NYSE:D) operations, stock performance, and its place in a world where there is a huge demand for power.

“Finally, there’s Dominion Energy, which passed the YEV test with flying colors. This is a gas and electric utility in Virginia, North Carolina; South Carolina, small gas utility business in South Carolina; and a big clean power generation business, one that includes a nuclear plant along with some wind, solar, renewable, natural gas.

I actually used to like Dominion a lot. This was a great growth utility for many years under the leadership of former CEO, Tom Farrell, long-time friend of the show. Before he retired as CEO in 2022, he stuck on as executive chairman but in April 2021, Farrell tragically died after a battle with cancer the day after he retired.

After that, Dominion seemed a bit lost to me. Frankly, in late 2022, the stock started to slide, but ultimately shaved off more than half its value before it bottomed roughly a year ago. Since then, it’s done much better. Stock’s up almost 42% from its lows last October and management conducted a top and bottom-line business review in order to come up with a new strategy. The problem for Dominion was that business just got too sprawling… They invested heavily in some expensive solar projects and some very complicated offshore wind projects. They also spent heavily to improve the regular power grid.

So, suddenly, the company was spending enormous tons of money. Plus, in 2022, anything related to alternative energy was just killed. But now they’ve simplified the business significantly. Dominion sold off most of its natural gas business at this point, [which] netted them a little more than $14 billion. Going forward, Dominion wants to be a pure-play-regulated electric utility with a merchant power kicker, I think that is a terrific idea. Right now, we have immense demand for electricity in this country. In fact, Dominion service area includes Northern Virginia, meaning they sell power to the world’s largest data center hub. According to Bloomberg, new data centers in the area face a seven-year wait for Dominion power, which tells you there’s insane demand for power.

Of course, Dominion needs to make some large investments in order to be able to handle all that demand, but they’ve got a bunch of money from selling off their natural gas businesses. I think they can afford it. That said, I’m not super thrilled about the strategy because many of these natural gas businesses were excellent, especially the pipelines and the stake in liquified natural gas export facility in Chesapeake Bay. I still need convincing on those expensive offshore wind projects. Although management says they’re largely complete at this point, I wouldn’t start one now to tell you that. Overall though, I’m warming back up to Dominion Energy. As much as I like these natural gas assets, they absolutely needed to simplify the business, and given the bull market power generation, sticking with electricity was the right call. Plus, pays a nearly 5% yield.

… the bottom line, when you screen for yield, earnings, growth, and value and you make that in screen incredibly harsh like we have, you wind up with a list of seven great stocks… and one that I actually have to tell you I’m intrigued [about], even though I’m not quite ready to recommend it. And that’s Dominion Energy.”

Dominion Energy (NYSE:D) operates a vast energy distribution network, serving around 2.8 million customers across Virginia and North Carolina. The company has established itself as a significant provider of electricity in the region. A significant factor influencing this landscape is the increasing demand for electricity from data centers, particularly driven by advancements in artificial intelligence. The Electric Power Research Institute anticipates that data centers may account for up to 9% of total U.S. electricity generation by 2030, highlighting an urgent need for clean and reliable energy sources.

Dominion Energy’s (NYSE:D) investments and initiatives have been instrumental in transforming Virginia into a prominent data center hub. Since 2019, the company has successfully connected 94 new facilities. The interplay between strong electricity demand and the swift expansion of data centers is expected to support sales growth for the Dominion Energy Virginia segment, projected to be between 4.5% and 5.5% for 2024. This year alone, the company has already connected nine new data centers, with plans to increase that number to 15 by the end of 2024.

8. Huntington Bancshares Incorporated (NASDAQ:HBAN)

Number of Hedge Fund Holders: 32

Cramer talked about Huntington Bancshares Incorporated (NASDAQ:HBAN) and discussed that regional bank stocks ought to perform better in a “falling interest rate environment”. He also mentioned that he likes regional bank stocks presently. He noted that these banks faced significant challenges when interest rates were raised sharply and kept high.

“The economy is still pretty darn strong, to the point where calling it a soft landing feels too negative. Throw in falling interest rates and that’s nirvana for the regional banks. And obviously, the credit losses will be less if we are in a cut cycle portion.”

Talking specifically about the company, Cramer expressed bullish sentiment about the stock.

“Next up, the Columbus-based Huntington Bancshares… the parent company of Huntington Bank, and a company, by the way, we know well. After speaking with CEO Stephen Steinour several times over the last couple years, I recommended this one in early August.

And when the whole market sold off hard after the yen carry trade fell apart, remember that fiasco? Since then, it’s rallied nearly 11%. I felt comfortable recommending Huntington into weakness because we just had Steinour on the show less than a week before in the wake of a very healthy quarter. Steinour told a really positive story, saying that we’re on the verge of a rate-cutting cycle. And after many banks spent last year on risk-weighted assets diets as they recovered from the crisis, that’s mostly over now.

Listen to this, ‘We are incredibly well-positioned in the Midwest, and in addition, we’ve recently expanded in the Carolinas and a bit into Texas. So we have this unique franchise with a lot of growth potential. Columbus itself, our headquarters city, is doing phenomenally well. We’ve been growing deposits every quarter, we’ve grown loans and we’re in a great position to continue to grow and frankly to help the economy and our customers.’

Again, terrific story. Even though Huntington has had a nice run since then, still got a 4.2% yield, plenty of earnings growth on the horizon as interest rates come down.”

Huntington Bancshares (NASDAQ:HBAN) is the holding company for The Huntington National Bank, which offers a wide array of banking services, including commercial, consumer, and mortgage banking, throughout the United States.

Recently, the bank announced an expansion into North Carolina and South Carolina, marking a significant step in its growth strategy. It builds on Huntington’s 2023 Commercial Banking expansion in these states and further increases its existing customer base in the Carolinas, supported by the establishment of its regional headquarters in Charlotte.

As part of this expansion, Huntington Bancshares (NASDAQ:HBAN) plans to invest heavily in the Carolinas, aiming to add over 350 employees across various business lines and open approximately 55 retail branches within the next five years. This retail expansion portrays the company’s focus on increasing its footprint in several key markets, which also include Denver, Minneapolis, and Chicago.